Bill Gross, the world's biggest bond investor, has not been in Greece for 15 years. Yet the welfare of millions of Greeks could improve with only a few kind words from him. Even so, he chooses not to.

From the LA offices of Pimco, the investment fund he co-founded nearly 40 years ago, Gross is sorry for the Greeks but is zealous about separating his investor from his global citizen self. He also feels sorry for millions of Britons, whose government has to pay higher interest to lure investors after he said in January that gilts were "resting on a bed of nitroglycerine". Despite his sympathy, while in his office, which has a view of the Pacific, the investor always prevails.

"My clients don't pay me to feel sorry, they pay me to bring them money. I am tough but I have a soft side," Gross says. "When I go home, I don't watch Fox [the Murdoch-owned right-wing news channel] and I vote for Obama."

Given the choice, he would vote for Labour in the forthcoming UK election. People need jobs and the economy needs to grow, he says. "I would vote Labour. Favouring employment versus the financial markets is a decent policy; certainly not beneficial for the currency or the gilt market but beneficial for the people," Gross says. "Good for you, go for it – but beware of the consequences."

The prospects of low interest rates and inflation, as well as a potential fall in sterling, could lose bond investors a lot of money. These scenarios could be considered a "default" in Gross's view – hence his comparison of Britain's debt to volatile nitroglycerine.

Devaluation

"The UK will try to get out of 16 tonnes of debt by reflation [low rates and high inflation] or devaluation," Gross says. "The pound is going down and they will have to keep policy rates under 1% for a long, long time because of the housing market, and because many mortgages have a floating rate."

Gross, however, gives credit to the government for having left the door open to continuing the gilt-purchasing programme – quantitative easing – as a way to re-ignite the financial system. Despite his ferocious criticism of British finances, he admits he holds some short-term UK bonds as they are less vulnerable to inflation.

At 65, and with $2bn (£1.3bn) to his name, Gross's idea of a fun weekend is to have a $12 dinner with Sue, his wife of 25 years, in the local El Torito Mexican chain, and dedicating time to golf, stamps and his three children. All of them are artists, encouraged by their father, who thought his big shadow might bring them more pressure than help. Son of a steel sales executive who moved from Ohio to San Francisco when he was 10, Gross landed in bonds by chance – he was unemployed after finishing an MBA at UCLA, when his mother found an ad for a junior credit analyst at Pacific Mutual in Newport Beach and encouraged him to apply.

Forty years and some $1trillion under management later, Gross still works from 4.30am to 6pm and has a small circle of friends. He doesn't like to socialise and hates cocktail parties. He admits he is not a "people person", although he declares himself anything but a "stuffed-shirt Wall Street-type".

Mild mannered and shy, he is proud that his trading room is quiet, far from Wall Street's tension and aggression. Interested in people above all, he studied psychology at Duke University – although he never thought human behaviour would affect finance so much.

"It gave me a window of interest into 'animal spirits' [Keynes' phrase for naive consumer confidence]," he says. "I am not a quant [quantitative analyst], I don't have a 150 IQ, so you behave according to where you are, and I tried to put an amount of suspicion in the modelling of anything. The model could get broken by animal behaviour."

He did not trust the investment bank models that so hugely overvalued toxic assets – one factor leading to the credit crunch. But now the worst recession since the second world war will put an end to the financial extravagance, he says. "It was a terrible display of excess and greed. Wall Street has had it too good for decades, it's time for Main Street to go on the ascendancy."

Time for people

Markets will be downsized by regulation, even if governments are slow in applying new laws. "The sun is not setting on Wall Street – there will always be sunshine on financiers – but high noon is in the past. It's time for ordinary people to benefit."

Governments should raise taxes on bankers, who "don't deserve all this", Gross says, including himself. "I don't need so much," he says. Economies such as the UK and the US should look to making "things, rather than paper" to prosper. "The bubble was reflective of wealth as a function of house prices and derivatives – that's not wealth. The Chinese are showing us what wealth is: transforming creative and well-trained work into exportable goods."

Gross says speculative products, such as the instruments that investors buy to protect themselves against a sovereign default, should also be withdrawn, backing a recent call by Germany and France, whose leaders have criticised speculators who use this market to bet against a country, most recently, Greece.

But Greece, as well as Spain, Britain and Portugal, have a bigger enemy than speculators: the bond vigilantes, or activist bond investors, of whom Gross is an arch-exponent. With funds worth almost half the size of the UK economy, high-deficit European countries need Gross, and the 15,000 investors who follow his podcasts, to buy their bonds.

This year alone, Britain is due to raise £220bn to pay for bailed-out banks, rising unemployment and falling taxes. Calling Britain a "must avoid" area, and one of the highly indebted countries that Gross calls the "ring of fire", doesn't help governments market their bonds.

Asked whether he's tempted to show some sympathy for Greece to help the country regain investors' confidence, he is adamant: "No. We've seen this game before – politicians talk it up and it's back to normal; they want to bring the vigilantes to their money. I've seen this in California over the past 20 years – it has been the biggest chiseller of all for a long time. Why should we be willing to jump into this water tomorrow? I feel sorry for the people because their standards of living will be affected. But Greece has stretched to the extreme."

Gross wants action. "Governments want to convince lenders they've been to rehab and now they're going straight," he says. "But like in the AA [Alcoholics Anonymous], just because you've been to a few meetings I'm not going to give you a full-time job."

In the small office he only uses when not sitting in the trading room, Gross has a picture of the US banker JP Morgan, with a quotation about lending on character, not assets. He's had it for 25 years and still follows the principle: he won't buy gilts and Greek bonds until he sees real budget cuts. Still, his much-admired Germany, "the literal head" of the European Central Bank, could help by "loosening up its monetary policy, or giving up its dream of union," he says.

Allowing Greece to default "would be like Lehman … it would destabilise the UK and other sovereign markets". A blackjack player, he says the Germans are "talking a good game [but] Pimco isn't buying it. Europe is all caught up in politics. Europe is a family – but a dysfunctional one."

The world's ultimate vigilante, he can smile as he says: "Our money is directed to countries where fiscal conservativeness is valued over growing deficit financings – you couldn't expect a bond person to think otherwise."